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RE: College Debt is Going To Destroy the Next Generation's Financial Independence

in #money7 years ago

The UK has, over the last 10-15 years, seen a shift from largely government-funded third level education, via grants and direct funding of universities to a model where a much greater proportion of the cost is borne by students taking loans from, effectively, a government department (The Department of Business, Innovation and Skills), via a state owned entity known as the Student Loan Company.

For students enrolling at university post-2012, they face a 6%+ interest rate (currently 6.1%) on increasingly large sums.

An argument given in favour is that it makes the 'market' for third level education freer, but in practice universities are incentivised to game the system in ways that produce some dysfunctional outcomes.

And it's not as if the new policy necessarily yields better outcomes for public finances; the plan seems to be to sell the debt off periodically to private finance firms, and write off unpayable loans.

It's hard to see how this is an improvement, given that contemporary UK students are among the most indebted in the developed world, which reduces disposable income going forward. If you wanted to reduce future economic growth, that would be one way to do it.